Uploaded September 2016 | Updated September 2026, 3 weeks ago
Professor Steve Keen (Kingston University) explains the role of reserves and "triangular exchange" developed by Augusto Graziani as part of the monetary circuit approach. The basic idea is that in a full-blown monetary economy, money itself is just a token, which requires 3 parties for a transaction: 2 people involved in the transaction and one entity to clear the transaction.
For instance, if we both had the same bank and I wrote you a check, then you and I are the principle parties, but the bank clears the transactions, by decreasing my account and increasing yours.
This is also seen when central banks clear payments between banks. Banks keep a reserve account at the central bank. When I write a check to you, my bank decreases my acount, then the central bank decreases my bank's reserve account, then increases your bank's reserve account, then your bank increases your account.
Added for good measure at the start is a quick debunking of the idea popular misconception that the entire monetary system depends on a growing debt level because there is not enough money to pay the interest on that debt. The argument goes like this: if you borrow $100 into existence, there isn't enough money around to pay the $103 you owe in total counting the interest. However, because money turns over, the $100 can actually finance any amount of income. For instance, if the money got spent 4 times in a year, it would represent $400 worth of transactions, well more than the $3 I need to pay the interest before repaying the $100.
See the whole video here: youtube.com/watch?v=hcD3cpuecu0&t=0s
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Professor Steve Keen (Kingston University) explains the role of reserves and "triangular exchange" developed by Augusto Graziani as part of the monetary circuit approach. The basic idea is that in a full-blown monetary economy, money itself is just a token, which requires 3 parties for a transaction: 2 people involved in the transaction and one entity to clear the transaction.
For instance, if we both had the same bank and I wrote you a check, then you and I are the principle parties, but the bank clears the transactions, by decreasing my account and increasing yours.
This is also seen when central banks clear payments between banks. Banks keep a reserve account at the central bank. When I write a check to you, my bank decreases my acount, then the central bank decreases my bank's reserve account, then increases your bank's reserve account, then your bank increases your account.
Added for good measure at the start is a quick debunking of the idea popular misconception that the entire monetary system depends on a growing debt level because there is not enough money to pay the interest on that debt. The argument goes like this: if you borrow $100 into existence, there isn't enough money around to pay the $103 you owe in total counting the interest. However, because money turns over, the $100 can actually finance any amount of income. For instance, if the money got spent 4 times in a year, it would represent $400 worth of transactions, well more than the $3 I need to pay the interest before repaying the $100.
See the whole video here: youtube.com/watch?v=hcD3cpuecu0&t=0s
Like Deficit Owls on Facebook:
facebook.com/DeficitOwls
